The ATO must be concerned about healthcare practitioners receiving lump sums and treating them as capital payments, as they have released a detailed fact sheet setting out what they expect to see in such situations.
If a healthcare practitioner (such as a doctor, dentist, physical therapist, radiologist or pharmacist) gets a lump sum payment from a healthcare centre operator, according to the ATO “it’s probably not a capital gain. It’s more likely to be ordinary income”.
Specifically, the lump sum will typically be ordinary income of the practitioner for providing services to their patients from the healthcare centre.
Importantly, the mere fact the payment is a one-off lump sum, or expressed to be principally consideration for the restraint imposed, for the goodwill or for the other terms or conditions, does not define it as having the character of a capital receipt.
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